City financiers and Britain’s three largest political parties - Labour, Tories and Liberal Democrats - have reacted with horror to the idea of a banking tax proposed by the head of the Financial Services Authority (FSA).
The banking and Westminster establishment are astonished that Lord Adair Turner, a former investment banker and author of the acclaimed Just Capital, has said in Prospect magazine that much of the speculative financial activity of the City of London is “useless”, and that action is needed to siphon money and talent towards more productive activities.
These points have been made by Green New Deal economists, monetary reformers and other critics of banking profits for some time. But Lord Turner’s criticism of the dogma – accepted by all the main parties – that “more complete markets are… definitionally good” has rocked them.
The Conservative Party, which has tried to take advantage of New Labour’s love affair with corporate capitalism, is nonetheless committed to the abolition of the FSA and further deregulation.
The Tobin tax idea is for a small percentage tariff on all financial transactions. In order to work, it would need to be accepted by all the main finance centres, which is its key weakness.
The idea was first mooted in 1971 by American Keynesian Professor James Tobin in order to discourage damaging speculative activity and to create a fund for tackling global injustice.
In his recent Prospect interview, Lord Turner – who joins a long line of capitalist critics of unregulated capitalism, including financier George Soros and Nobel Laureate economist Joseph Stiglitz – said that the financial sector needed to be cut down to size.
Though Tobin-like proposals have long been the currency of some social justice and development campaigners, it is only this week that the idea of a tariff on financial transactions has hit the media headlines, and from a most unlikely source.
Economic analysts suggest that Lord Turner is “flying a kite”, but that he is also serious about thoroughgoing reform of the City.
More on economic issues from Ekklesia:
* Towards an economy worth believing in - http://www.ekklesia.co.uk/node/6015
* Where is the Church of England’s heart invested? - http://www.ekklesia.co.uk/research/church_of_englands_investments